The Italian Competition Authority opens a second phase investigation into a merger between major ferry companies



By a decision made on 30 May 2012 (Case C11613, CIN/Tiirrenia di Navigazione), the Italian Competition Authority (ICA) has opened a second phase investigation under Article 16 of the Act 287/1990 into the proposed acquisition of ferry service branch of the debt-stricken publicly owned ferry operator Tirrenia by Compagnia Italiana di Navigazione (CIN). CIN is a company expressly incorporated to execute the acquisition. Following the implementation of the transaction,  Moby, a major competitor of Tirrenia, and L19 an equity fund, will have the joint control of CIN, and therefore of Tirrenia. The Tirrenia branch to be bought is that for the provision of passenger and freight ferry services from/to mainland and Sicily, Sardinia and minor islands. The branch includes the vessels necessary to operate the links and, above all, but the profitable public service obligation contract that, following the closing of the transaction, CIN will sign with the Italian Government. The contract will have a 8 year length and will set minimum frequencies and capacities and maximum prices for 14 links.
The transaction in its original form was notified to the European Commission that opened an in-depth investigation (Case M6362). According to the Commission, because of high aggregate market shares of CIN and Tirrenia on a number of well travelled routes between Italy and Sardinia, the proposed concentration raised serious competition concerns on these markets. The Commission closed the proceedings as the parties abandoned the concentration when the ferry group Grimaldi and  the holding company Marinvest  controlling the ferry operators GNV and SNAV withdrew from CIN.
The parties to the new streamlined form of the transaction, with only Moby still interested in the acquisition, fell short of the financial thresholds for the European Commission jurisdiction. Therefore, the concentration was notified only to the ICA.
Also the ICA believed that the transaction was likely to have anticompetitive horizontal effects due to the overlapping services of Tirrenia and Moby on many Sardinian routes where they have high market shares. Competitors would be unable to exert a credible competition pressure on the merging parties due to limited capacity and sharing code agreements with them. Moreover the ICA noticed the presence of high entry barriers in the form of congested ports during the busy summer season. Finally, the ICA pointed at the possibility of anticompetitive vertical effects. These may be come from the fact that Moby has the monopoly in the market for towing services at the Sardinian ports and because both the merging parties operate passenger terminals at some of the ports they connect.
In the light of the above consideration, it is possible to say that the ICA should impose stringent remedies on the parties for the clearance of the transaction.  

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